Question

If you observe that the current yield curve is moderately upward sloping, it is likely that

Select one:

an economic expansion has just begun.

a recession is nearly over.

an economic expansion has been going on for several years.

a recession is about to begin.

Question 15

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The supply curve of reserves in an economy is horizontal when

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the federal funds rate is greater than the seasonal credit discount rate.

the federal funds rate is less than the primary credit discount rate.

the federal funds rate equals the primary credit discount rate.

the federal funds rate is less than the secondary credit discount rate.

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Money that is created in the private sector, such as checking accounts at banks, is referred to as:

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commodity money.

inside money.

outside money.

representative money.

Question 17

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Which of the following securities is likely to have the highest yield to maturity?

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A corporate bond with Aaa rating

A government bond exempted from federal income tax

A corporate bond with a Baa rating

A certificate of deposit with a three months to maturity

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Aaron takes $100 out of his checking account and puts it in his savings account while Biff withdraws $200 from his money-market mutual fund in the form of cash. The total effect is that M1 ____ and M2 ____.

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is unchanged; is unchanged

rises by $100; is unchanged

is unchanged; falls by $100

rises by $100; falls by $100

Question 19

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How long is the normal term in office for a Governor of the Federal Reserve Board?

Select one:

Seven years

Fourteen years

Five years

Life

Answer 1

Hi,

14.

Option (c) An economic expansion has been going on for several years.

A standard or up sloped yield curve suggests yields on long-term bonds will continue to increase, leading to economic expansion cycles. When investors expect longer-term bond yields to grow much higher in the future, they will temporarily park their funds in shorter-term securities in anticipation of higher returns later purchasing longer-term bonds.

15.

Option (d) The federal funds rate is less than the secondary credit discount rate.

Competition between banks should prevent federal funds from slipping below the interest rate that the Fed charges on the reserve balances of banks. The discount rate sets a cap on the federal funds rate, allowing the supply curve to become horizontal for reserves.

16.

Option(b) Inside money.

Insider money is another type of money that is created by the Private Sector and the Checking account held at the bank is the example of inside money. The money represented at the checking account serves as the medium of exchange and to check on the things that can buy.

17.

Option (c) A corporate bond with a Baa rating

Corporate Baa bonds have the highest yields as they (of those graphed) have the highest default risk, and their bond markets are usually not very liquid. Corporate Aaa bonds are next because they are relatively safer than Baa bonds (less default risk) and they may also be fairly liquid.

18.

Option (b) Rises by $100; is unchanged

19.

Option(b) Fourteen years

The members of the Board of Governors are nominated by the President of the United States and confirmed by the Senate, including the Chairman. A Governor has a full term of 14 years. The Federal Reserve, also known as the Fed.